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Cline says that having a level of predictability within a business allows the company’s management team to examine, for example, lead times, understanding forex, forwarding, freight and clearing costs,  as well as understanding how frequently customs stops are experienced, should the business be importing its goods.

Unforeseen delays, as well as not having an adequate business relationship with customs, could have “enormous ramifications” for businesses, which costs more money in terms of storage while awaiting customs inspections or return fees, for example.

Having a sense of predictability, whether it be with potential events or a predictable line of funding to fill monetary gaps, Cline notes, will enable businesses to 'understand the total funding costs, [which businesses have] to consider within the concept of inbound supply chain, and the business as a whole."

According to Cline, businesses that are considering importing goods or that want to ensure a level of stability need to ensure they have a reliable line of funding in place and that they are dealing with companies that have a strong technology platform that allows them to understand the inbound supply chain.

This will assist businesses in understanding their working capital situation and to structure their debt appropriately, so that it is not too expensive and does not become an emergency fund, while simultaneously having foresight into the way that businesses are trading internationally, “because we’re anticipating a bumpy ride in the near future”.

Cline suggests that businesses work with a clearing and forwarding agency and with reputable supply chain management companies to prevent unforeseen delays.

READ MORE: Brace yourself! Five predictions for Budget2020

Should unforeseen delays occur when importing goods, companies should be looking towards data analytics to evaluate its inbound supply chain cost and timing so that it can determine what will be "the most profitable way to get [its] goods from a foreign supplier into the warehouse."
South Africa's trade surplus

Taking into account that South Africa’s trade surplus widened to R12.3-billion in November 2019 – meaning that there were more exports than imports – Cline points out that in order for businesses, and the economy, to grow, a downgrade of South Africa’s rating would need to be avoided, as does further power supply interruptions by State-owned power utility Eskom.

Business confidence also needs to be restored.

Cline notes that, with expectations that South Africa’s gross domestic product is not likely to be higher than 1% this year, and the fact that load-shedding remains a concern for the foreseeable future, the country may well have its ratings be downgraded to junk status.

An investment-grade downgrade will lead to a reallocation of foreign funds to other investment-grade emerging markets.

“If there is an outflux of foreign direct investment (FDI), . . . there is a lower demand for the rand and a higher demand for foreign currency. The rand will weaken, which will potentially lead to increased inflation, while imported products become more expensive,” he elaborates.

The cost of imports will increase because it will factor in a higher petrol price, for example.

“If you’re downgraded to junk status, it’s a difficult situation because it precludes a lot of FDI and that’s an important factor when it comes to large infrastructure projects that need to be funded, because it’s those projects that are key to creating jobs in high volumes.”

Despite the looming potential downgrade by ratings agency Moody’s, and South Africa’s numerous woes, Cline is still positive about the business environment, stating that he believes South Africa has the ability to “service a global economy through, among others, its mining, automotive and agriculture sectors”.


This article was originally published in Engineering News